Limitations to the Anti-Kickback Statute? Seventh Circuit Reverses Conviction Finding “Aggressive” Marketing Tactics Insufficient to Prove an AKS Violation Where Doctors Retain Independence in Their Medical Decisions

On April 14, 2025, the United States Court of Appeals for the Seventh Circuit reversed the conviction of the owner of a durable medical equipment (“DME”) distributor, ruling that there was insufficient evidence to support a violation of the Anti-Kickback Statute (“AKS”). While referring to the defendant’s “aggressive” advertising campaign, the court found that his payments to advertisers and a manufacturer were not made for referring patients within the meaning of the AKS because the recipients of the payments were neither physicians nor other decisionmakers in positions to influence healthcare decisions. This decision is important in that the court attempts to mark boundaries between lawful marketing strategies and illegal kickbacks. A key point for the court was that the compensation arrangements at issue were with non-physicians and did not compromise physicians’ independent medical judgment.

Facts

Defendant Mark Sorensen owned SyMed, Inc., a DME distributor. In 2015, he met with the owners or executives of a DME manufacturer, a marketing company, and a billing agency. The four of them agreed on a plan to advertise orthopedic braces to patients, obtain signed prescriptions from the patients’ doctors, distribute the braces, and bill and collect reimbursement from Medicare.

The business model involved the marketing firm (and a second marketing firm) placing advertisements for orthopedic braces. Interested patients would respond and fill out forms, including their doctors’ contact information. The forms would be sent to a call center where a sales agent of the marketing firm would speak with the patients to discuss ordering a brace. The sales agent would generate prefilled, but unsigned, prescription forms and, with consent from the patients, send the form to their doctors. If the doctor signed the form, Sorensen’s company SyMed would instruct the manufacturer to ship the brace and the billing company would submit a claim to Medicare on behalf of SyMed. SyMed would provide a percentage of the Medicare payment to the manufacturer and billing company. SyMed would also pay the marketing companies based on the number of leads they generated. From 2015 through 2018, SyMed billed Medicare $87 million and received $23.6 million. Notably, physicians declined 80% of the orders received.

Sorensen was indicted and charged with conspiring to violate the AKS and three substantive counts of violating the AKS based on three specific payments. He proceeded to trial and was convicted on all counts. He moved for a judgment of acquittal that was denied, and he was sentenced to 42 months in prison. Three individuals at the marketing companies were also indicted but pleaded guilty before trial to conspiracy to violate the AKS.

The Court’s Analysis

Sorensen appealed his conviction and the denial of his motion for acquittal arguing that the evidence was insufficient to sustain a conviction. The appellate court reversed the conviction.

In its opinion, the appellate court noted that the AKS primarily targets payments to individuals with influence over or access to patients that lets them control or influence the patients’ choices about medical care. While a typical example involves a physician who accepts money in exchange for sending patients to a specific healthcare provider, the statute also applies to non-physicians. The court explained that the payor in such a situation must act with the intent to induce referrals from the recipient of the payment. To that end, the recipient’s position is relevant to determine whether the payment was for an improper purpose under the statute.

To determine whether a payment to a non-physician was for a prohibited purpose, the court explained that it must consider whether the recipient could “leverage fluid, informal power and influence” over the healthcare decision. That is, could Sorensen and his business partners control or improperly influence the doctor’s decision to prescribe the orthopedic braces? According to the court, they could not. The recipients of the payments only provided advertising services or manufactured and distributed the braces. They did not refer any patient to a healthcare provider.

Instead, the court stated, “The key point is that, on the record, physicians always had ultimate control over their patients’ healthcare choices and applied independent judgment in exercising that control.” The Court further stated, “[T]here is no evidence that anyone whom Sorensen paid had any special relationship with or influence over patients’ physicians so as to subject them to improper influence.” Key to the court’s decision was that 80% of the prescriptions were not signed by the physicians. The physicians were “not rubber stamps” but instead retained independent decision-making authority related to their patients’ care.

Key Takeaways

• Whether the recipient of a payment is in a position to control or improperly influence healthcare decisions is a key factor in analyzing a potential AKS violation.
• Percentage-based compensation structures are not per se illegal. The payments must be made in order to induce an unlawful referral. Of course, such structures can create risk. Key to the court’s decision here was that no portion of the alleged “kickbacks” was funneled to the independent physicians who, thus, exercised clinical judgment that was free from any improper inducement.
• A recommendation for healthcare services is not necessarily an illegal referral.
• Payments to marketing and advertising firms, including on a per-lead generation basis, may not be an illegal kickback if the marketing and advertising firms do not exert direct or improper influence over the physicians and the physicians maintain independence in their medical decisions.
• Interestingly, if all the participants had worked for Sorensen at the same company, the scheme that led to his (now overturned) conviction likely would have fallen under a safe harbor exception to the Anti-Kickback Statute exempting payments by an employer to an employee.

Conclusion

Even though Sorensen’s conviction was overturned by the appellate court, this case illustrates the risk inherent in structuring legally compliant compensation arrangements for healthcare providers. The government has a history of prosecuting certain payment arrangements involving marketers and sales agents for AKS violations. In addition, the government and private whistleblowers can pursue civil actions for violations of the False Claims Act based on alleged violation of the AKS. Therefore, counsel should be consulted before entering such arrangements, particularly those involving sales and marketing related to products that are reimbursed by government healthcare programs, including Medicare, to minimize the risk of a government investigation.